With the new financial well and truly here, the Australian government has made significant chances to the tax cuts that have taken effect form 1 July 2024. Here’s the breakdown of the changes and how this may impact you.
What’s Changing?
The ‘Stage 3 tax cuts’ scheduled for implementation on 1 July 2024 have been modified. The primary changes include adjustments to personal income tax rates and income brackets. The tax-free threshold remains at $18,200. Here are the key changes:
- The 19% tax rate will drop to 16%.
- The 37% tax bracket is reinstated, applying to incomes between $135,000 and $190,000.
- The threshold for the 45% tax rate is lowered from $200,000 to $190,000.
Tax Rate Comparison
Here’s a comparison of the current tax rates, the original Stage 3 tax cuts, and the new rates effective from 1 July 2024:
| Taxable Income | Current Rate | Original Stage 3 Rate | New Rate (from 1 July 2024) |
| Up to $18,200 | Nil | Nil | Nil |
| $18,201 – $45,000 | 19% | 19% | 16% |
| $45,001 – $120,000 | 32.5% | ||
| $45,001 – $135,000 | 30% | 30% | |
| $120,001 – $180,000 | 37% | ||
| $135,001 – $190,000 | 37% | ||
| > $180,000 | 45% | 45% | 45% |
*Note: These rates apply to Australian resident taxpayers and include the Medicare levy of 2%.
How Will I Receive the Savings?
The reduced tax rates will decrease the amount of tax withheld from your regular pay. Employers will adjust the tax withheld, resulting in incremental savings throughout the year. There’s no need to alter how you complete your tax return.
How Much Tax Will I Save?
The table below shows potential tax savings for different income levels:
| Taxable Income | Tax Liability (2023/24) | Tax Liability (from 1 July 2024) | Tax Saving |
| $30,000 | $1,942 | $1,588 | $354 |
| $40,000 | $4,367 | $3,713 | $654 |
| $50,000 | $7,467 | $6,538 | $929 |
| $60,000 | $11,067 | $9,888 | $1,179 |
| $70,000 | $14,617 | $13,188 | $1,429 |
| $80,000 | $18,067 | $16,388 | $1,679 |
| $90,000 | $21,517 | $19,588 | $1,929 |
| $100,000 | $24,967 | $22,788 | $2,179 |
| $110,000 | $28,417 | $25,988 | $2,429 |
| $120,000 | $31,867 | $29,188 | $2,679 |
| $130,000 | $35,767 | $32,388 | $3,379 |
| $140,000 | $39,667 | $35,938 | $3,729 |
| $150,000 | $43,567 | $39,838 | $3,729 |
| $160,000 | $47,467 | $43,738 | $3,729 |
| $170,000 | $51,367 | $47,638 | $3,729 |
| $180,000 | $55,267 | $51,538 | $3,729 |
| $190,000 | $59,967 | $55,438 | $4,529 |
| $200,000 | $64,667 | $60,138 | $4,529 |
Concluding thoughts to consider:
- Super contributions: concessional contributions can offset tax payable with more benefit the higher your income is but the change mean there is little benefit of salary sacrifice or personal concessional contribution if your income is below $45,000
- Asset sales: important to review your income and what tax bracket you fall under when considering selling assets
- Tax cuts will happen automatically! Nothing required by you.
The information provided should not be considered personal financial advice as it is intended to provide general advice only. The content has been prepared without taking into account your personal objectives, financial situations or needs. You should seek personal financial advice before making any financial or investment decisions.